Saturday 5 November 2005 20.28 EST
First published on Saturday 5 November 2005 20.28 EST

Tesco faces the prospect of being forced to sell off some of its shops in what would be an explosive intervention aimed at curbing the retail giant's high street dominance.

MPs, retailers and think tanks are calling for the measure to be considered by regulators, who have indicated they will look seriously at the proposal.

Labour MP Jim Dowd, who is chairing a parliamentary inquiry into the future of the high street, to be published next month, said: 'The big four do have a huge market share which is continuing to grow apace. Tesco said that in 10 years it could have 1,200 convenience stores in a sector it wasn't even in 10 years ago.

'We are approaching the technical definition of what constitutes a monopoly. Therefore regulations have to be considered. We are considering the potential for divestment. In the US, the cockpit of international capitalism, they have taken this approach in a variety of industries, notably telecommunications with Bell.'

'There's certainly a case for divestment,' says Andrew Sims, policy director at the influential New Economics Foundation think tank. 'It's the logical place to go. The muffled cries you can hear is the sound of the marketplace being strangled by the big four.'

The Office of Fair Trading, led by Dr John Fingleton, believes that forcing supermarkets to sell off stores is a possibility, with the precedent set 15 years ago in the brewing industry. The 'Beer Orders', which forced the big brewers to sell off their pubs, resulted in a thriving small brewery sector, says the OFT. Critics argue that it led to the decimation of British-owned large-scale brewing.

Growing moves to curb the power of supermarkets come as Tesco confirmed to MPs investigating the future of the high street it planned to more than double its Express convenience stores to more than 1,200 by 2015. Asda, which has shied away from smaller high street stores, is poised to follow suit.

But as supermarkets are opening convenience-style high street stores, in the four years to 2004, 7,377 independent shops, more than 20 per cent of the total, closed.

And suppliers complain that they are forced to sell products barely at a profit, such is supermarkets' buying power.

Tesco is Britain's biggest retailer with over 30 per cent of the £76 billion UK grocery industry, accounting for more than one in every eight pounds spent by shoppers.

Asked if the public interest would be best served by Tesco selling off its supermarkets, Lucy Neville-Rolfe, Tesco's company secretary and director of legal and public affairs, said: 'I think the public interest would need to be looked at in a proper manner by government regulatory authorities and I would hope that when [they] talked to us and looked at our operations in detail [they] would come to the view that that was a bad idea.'

Only the Competition Commission has the authority to order Tesco to sell off stores and the OFT is now reviewing whether to recommend that it launch a new investigation into the groceries market. On Friday, Poland's new finance minister reportedly said that Tesco was unwelcome in her country because the hypermarkets it builds destroy city centres.